India to begin outperforming world peers in a decade: Morgan Stanley

Sandeep Dikshit 

New Delhi, November 8

Over the next decade, while the US and China will remain just as important to global investors, we think the ascendancy of India’s economy will mean it will feature more prominently on their radars, Chief Asia Economist at Morgan Stanley, Chetan Ahya, has written.

The key, he said, lies in the size and scale of India’s opportunity set.

Morgan Stanley has forecast that India will be the third-largest economy by 2027, with its GDP more than doubling from the current $ 3.4 trillion to $8.5 trillion over the next 10 years. Incrementally, India will add more than $ 400 billion to its GDP every year, a scale that is only surpassed by the US and China.

These projections are underpinned by a confluence of favourable domestic and global forces. The most important change domestically is the shift in policy approach away from redistribution and towards boosting investment and job creation.

This was evident in the introduction of the GST which creates a unified domestic market; corporate tax cuts; and production-linked schemes to incentivise investment. Overlaying this is the emergence of a multipolar world where companies are diversifying their supply chains, with India emerging as a destination of choice. These forces will integrate India’s fast-growing workforce into the global economy, says Morgan Stanley.

India is now making concerted efforts to attract investment to boost manufacturing exports. These new factories and offices of the world will draw more employment into the formal sector and more crucially raise productivity growth, creating a virtuous cycle of sustained growth. Indeed, the shift in India’s policy approach is moving it closer to the East Asian model of leveraging exports, raising saving and recycling it for investment.

Against this backdrop, India is entering a phase where incomes will be compounding at a fast rate on a high base.  India’s real GDP growth will average 6.5 per cent over the coming decade while China’s will average 3.6 per cent.

“We estimate India is set to drive a fifth of global growth in the coming decade. We think this offers a compelling opportunity for multinationals and global investors in a world starved of growth,” said Ahya.